Published August 13, 2008

M'sia GDP seen growing 6% in 2008

Trade Minister cites robust manufacturing and exports, warns of challenges ahead

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(SINGAPORE) Malaysia's economy may expand at the higher end of the official forecast range this year, even as it faces a 'more challenging' time ahead, Trade and Industry Minister Muhyiddin Yassin said.
Trying times: Motorists crowding a petrol station before the government announced an increase in petrol prices

Gross domestic product may grow at a 'modest' pace of about 6 per cent in 2008, Mr Muhyiddin said in Singapore yesterday, citing 'robust' manufacturing and exports. The central bank had forecast in March that the economy would expand 5 per cent to 6 per cent this year.

'While the Malaysian economy has performed well in the first quarter, Malaysia expects to experience more challenging times as a result of global economic volatilities,' the minister said at a forum in Singapore.

A faltering US economy is hurting demand for Asian-made goods and threatening expansion in the region.

Governments from South Korea to Singapore have lowered their 2008 growth forecasts since the start of the year as the global slowdown spreads and soaring food and fuel prices hurt spending.

Malaysia's economy grew 5 per cent to 6 per cent in the second quarter, slowing from 7.1 per cent in the previous three months, Mr Muhyiddin said. The government will release second-quarter data on Aug 29, together with an update of its 2008 economic forecast.

The trade ministry last month cut its forecast for export growth this year to 6 per cent from an earlier estimate of 7 per cent as slowing demand from the US, its largest overseas market, damps global trade. Industrial production grew at the slowest pace in 10 months in June, a report yesterday showed.

Malaysia approved US$7.2 billion of manufacturing investments in the first six months of 2008, Mr Muhyiddin said yesterday. Some 236 projects were approved during the period.

'Despite the intense global competition, Malaysia has significantly attracted higher levels of foreign direct investments,' the minister said.

Still, Malaysia approved RM9.9 billion (S$4.19 billion) of manufacturing investments in the second quarter, a 61 per cent decline from a year earlier, Lee Heng Guie, chief economist at CIMB Investment Bank Bhd in Kuala Lumpur, said in a research note yesterday.

Commodities sales, which have been holding up Malaysian exports this year, may also ease as palm oil and crude oil prices fall from record highs. The nation is the world's second-biggest palm oil exporter and South-east Asia's No 2 oil and gas producer.

The government has tried to shore up domestic consumption as the risks to exports increased, seeking to help consumers cope with rising costs of living.

Domestic banks have agreed to a government proposal to restructure housing and hire purchase loans, giving borrowers a longer repayment period, Second Finance Minister Nor Mohamed Yakcop said in Kuala Lumpur yesterday.

Malaysia's central bank unexpectedly refrained from raising its benchmark interest rate last month, breaking with its Asian neighbours which have increased borrowing costs to cool inflation amid soaring food and oil prices. -- Bloomberg